Telstra submits non-compliant NBN bid

Telstra this morning submitted what appeared to be a non-compliant mini-bid to build the National Broadband Network, in what appeared to be a 'middle-ground' approach after receiving no certainty on whether a successful bid would force it to separate its operations.

update Telstra this morning submitted what appeared to be a non-compliant mini-bid to build the National Broadband Network, in what appeared to be a 'middle-ground' approach after receiving no certainty on whether a successful bid would force it to separate its operations.

Telstra chairman Donald McGauchie(Credit: Telstra)

The full Telstra bid can be downloaded here (PDF). Telstra had
been threatening not to bid because of the looming spectre of
structural separation of the network's operator, where the network
arm would be operated as a separate business to that of the retail
and wholesale arms.

The government had been unable to provide clarity on whether the
telco would be required to separate if it won. Telstra had held
a last minute board meeting today to decide. A few
minutes after 12 noon, the company published its bid documents, consisting of a mere 13 pages, compared to rival Terria's approximately 1,000.

"Unfortunately these issues [such as separation] have not yet
been able to be addressed in a manner that would enable Telstra to
submit its fully detailed bid under the RFP today," Telstra said.

Telstra was also concerned about other issues such as the use of
its information and the contract terms issued by the
Commonwealth.

The telco's bid documents included what appeared to be non-compliant components, such as building a network which would not reach 98 per
cent of the population. Telstra said its current bid would reach 90
per cent.

"Telstra has spent very considerable time and effort attempting
to find a way to reach coverage of 98 per cent of the population
that is the target in the RFP. However, three factors have made
that unreachable at this time," the bid said.

They were that the
cost rose exponentially as the population coverage reached 98
percent and that current economic conditions had increased build costs
and the cost of capital. The telco also mentioned the possibility of slower customer take-up rates in a sluggish economy.

However, the coverage could turn out to be even less, according
to the bid, perhaps sinking as low as 80 per cent.

"The actual population coverage will depend on a range of
factors relating to Commonwealth funding, forecast build costs at
the time contractual commitments are made, take-up levels and the
suite of regulatory settings," the bid said.

Telstra would commit $5 billion of its own cash to building the
network, according to the document, with which it said it could
even roll out to five of the capital cities without the
government's $4.7 billion, in the case that the government
required the money for something else in the current economic
environment. However, to reach 80 to 90 per cent population
coverage, it would need the government's money, preferably as a
loan at favourable interest rates, Telstra said.

The detailsIn 65 to 75 per cent of the footprint, downlink speeds would be
25Mbps to 50Mbps, according to the company, with speeds of 12Mbps to
20Mbps for the rest of the footprint.

Entry-level access to the network would be at 1Mbps/256Kbps for
retail users, the company said, with a 200MB download quota costing
$29.95 with an "NBN telephone service" and $39.95 without one.
Business users would have access to 1GB at speeds of 1Mbps/1Mbps for $65
with a phone service and $75 without one.

Telstra would try and reach as many people as quickly as
possible with the roll-out, according to the company's bid, which
would steer it towards starting in metropolitan areas.

"Because Australia
is highly urbanised, the majority of those currently without fast
broadband are located in the major cities, where homes and
businesses located more than 1.5 km from their local telephone
exchange cannot currently get fast fixed broadband using Telstra's
existing telephony network," the documents said, saying that the
roll-out priority shouldn't be based on geography for its own sake.
The build could be "well underway next year" according to the
bid.

The company confirmed that Alcatel-Lucent was its chosen vendor
partner, to supply the equipment and know-how for the roll-out of the
network.

Despite the shortness of the bid, Telstra reiterated its beliefs
that it was the prime bidder, saying it had the right experience,
the workforce and the wherewithal to finance the investment,
especially since it claimed the work would only be an upgrade of
the company's own network.

"Telstra believes the Government can consider its proposal
under the existing terms of the RFP and should agreement be reached
on outstanding concerns a possibility exists for more detailed
dialogue."

The company did not seek any protection against competitive
networks, according to the documents.

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